The local stock market’s rally resumed on May 29 after a hesitant start.

Despite overnight gains on Wall Street, most local investors started the day on a cautious footing, unsure if the two-month old rally will resume or peter out.

This follows Thursday’s lacklustre performance as investors were unnerved by the larger than expected 6.2% GDP decline for Malaysia in the first quarter of 2009.

The KLCI started trading on Friday higher, but quickly fell into negative territory, where it stayed for half the morning session. However, investors regained their confidence in the afternoon session, sending the benchmark index up as much as 17 points at its intra-day high.

Late profit-taking activities, however, trimmed the gains to just 2.9 points, with the KLCI ending at 1,044.1.

Investors may have decided to lock in some gains ahead of a number of key US economic data due out later on May 29, including the second round of first quarter GDP estimates and the Chicago Purchasing Managers’ Index.

Market breadth was positive with advancing stocks beating declining ones by a 3-to-2 margin. Volume expanded from Thursday’s lackluster 1.08 billion shares to 1.77 billion shares.

Investors took their cues from a number of factors, including a rally in regional markets, rising crude oil and palm oil prices. Benchmark indices in Japan and Hong Kong rose to their highest levels in eight months. Palm oil prices rose further to above RM2,500 per tonne.

Crude oil prices have also rallied strongly in the past week, rising to above US$65 per barrel as the market adjusted to shrinking supplies after a spate of rising inventories earlier. Last week, US oil inventories fell for the third consecutive week.